Vascular endothelial growth factor A (VEGFA) plays a pivotal role in the first steps of endothelial and haematopoietic development in the yolk sac, as well as in the establishment of the cardiovascular system of the embryo. At the onset of gastrulation, VEGFA is primarily expressed in the yolk sac visceral endoderm and in the yolk sac mesothelium. We report the generation and analysis of a Vegf hypomorphic allele, Vegf(lo). Animals heterozygous for the targeted mutation are viable. Homozygous embryos, however, die at 9.0 dpc because of severe abnormalities in the yolk sac vasculature and deficiencies in the development of the dorsal aortae. We find that providing 'Vegf wild-type' visceral endoderm to the hypomorphic embryos restores normal blood and endothelial differentiation in the yolk sac, but does not rescue the phenotype in the embryo proper. In the opposite situation, however, when Vegf hypomorphic visceral endoderm is provided to a wild-type embryo, the 'Vegf wild-type' yolk sac mesoderm is not sufficient to support proper vessel formation and haematopoietic differentiation in this extra-embryonic membrane. These findings demonstrate that VEGFA expression in the visceral endoderm is absolutely required for the normal expansion and organisation of both the endothelial and haematopoietic lineages in the early sites of vessel and blood formation. However, normal VEGFA expression in the yolk sac mesoderm alone is not sufficient for supporting the proper development of the early vascular and haematopoietic system.